The gross tax revenue collected in the April-February period is nearly flat — a growth of 0.12% — compared to the mop-up in the corresponding period a year ago, the government said in Parliament on Monday. This makes it difficult for the government to achieve the modest growth baked into the revised estimate for gross tax collections this fiscal.
The government garnered Rs 16.89 lakh crore of tax revenue (net of refunds) in the first 11 months of the fiscal, compared with Rs 16.87 lakh crore in the same period last year. In the face of the sluggish revenue collection growth, the government had cut the Budget estimate for gross tax collection by nearly Rs 3 lakh crore to Rs 21.63 lakh crore, a growth of about 4% over the actual tax collection last year.
Due to corporate tax cut announced in September last year, the total direct tax collection for the April-February period came in 3.5% lower at Rs 8.14 lakh crore. However, indirect tax collection, which includes GST, saw a growth of 3.8% at Rs 8.75 lakh crore.
Despite the reduction in revised estimate in the Budget for FY20, the government’s collection is likely to fall short by Rs 1.25 lakh crore if the trend for the April-January period is extrapolated for the whole year. The net of tax revenue, after devolution to the states, would miss the revised estimate target by over Rs 2.15 lakh crore, or 14.3% of the target.
The biggest shortfall will come from personal income tax collection, which is likely to miss the mark by nearly 12% or Rs 66,000 crore. This is followed by Rs 36,000 crore short mop-up in corporate tax and about Rs 20,000 crore in customs. Excise duty collections will also meet only 93% of the revised estimate, missing the mark by over Rs 17,000 crore. With improved GST collection, the Centre portion of the indirect tax would miss the mark by Rs 14,400 crore.
However, the dispute resolution schemes, in both indirect and direct tax schemes, could come to the rescue to mitigate much of the projected shortfall. While indirect tax dispute resolution scheme (Sabka Vishwas) has already garnered about Rs 35,000 crore for the government, it is expected that corresponding direct tax scheme (Vivad Se Vishwas) could yield even better results given the amount stuck in direct tax litigation is nearly three times.
Further, while the payment from indirect tax scheme is about 10% of the total amount stuck in litigation, the proportion could be double in direct tax scheme as the former was designed to give relief of up to 70% in certain cases.
So, assuming the direct tax scheme yields 20% of the stuck amount, it would lead to a windfall of about Rs 1.8 lakh crore. Together, the schemes would yield Rs 2.2 lakh crore in gross revenue. In net terms or after devolution to states, the central government could net Rs 1.2 lakh crore, thus reducing the net tax revenue deficit to Rs 1 lakh crore.